Source: E-mail dt. 16.08.2012


An Analytical Study on E- Banking in India


Dr. A. Vinaygamoorthy

Associate Professor, Department of Commerce, Periyar University, Salem - 636 011




Mr. C. Sankar

Ph.D., Research Scholar, Department of Commerce, Periyar University, Salem - 636 011




In the 1990s, the banking sector in India saw greater emphasis being placed on technology and innovation. Banks began to use technology to provide better quality of services at greater speed. The Internet Banking is becoming one of the fastest growing technologies that is playing a significant role in the daily lives of human beings. Internet Banking and Mobile Banking made it convenient for customers to do their banking from geographically diverse places. Banks also sharpened their focus on rural markets and introduced a variety of services geared to the special needs of their rural customers. The Internet is slowly gaining popularity in India. The Internet Banking is changing the banking industry and is having the major effects on banking relationships. Internet Banking involves delivery of banking products and services. At present many of the banks around the world have web presence in form of ATMs, Internet Banking, Support services etc. In the world of banking, the development in information technology has an enormous effect on development of more flexible payment methods and more- user friendly banking services. Electronic Banking services are new and the development and diffusion of these technologies by financial institutions is expected to result in more efficient banking system.


Key words: Internet Banking, Support services, technology, innovation.


1.1 Introduction


Banking in India originated in the last decades of the 18th century. The oldest bank in existence in India is the State Bank of India a government-owned bank that traces its origins back to June 1806 and that is the largest commercial bank in the country. Central banking is the responsibility of the Reserve Bank of India 1935 formally took over these responsibilities from the then Imperial Bank of India, relegating it to commercial banking functions. After India's independence in 1947, the Reserve Bank was nationalized and given broader powers. In 1969 the government nationalized the 14 largest commercial banks; the government nationalized the six next largest in 1980.


Currently, India has 96 scheduled commercial banks (SCBs) - 27 public sector banks (that is with the Government of India holding a stake), 31 private banks (these do not have government stake; they may be publicly listed and traded on stock exchanges) and 38 foreign banks. They have a combined network of over 53,000 branches and 17,000 ATMs. According to a report by ICRA Limited, a rating agency, the public sector banks hold over 75 percent of total assets of the banking industry, with the private and foreign banks holding 18.2% and 6.5% respectively.


1.2 Definition of E-Banking


E-Banking is defined as the automated delivery of new and traditional banking products and services directly to customers through electronic, interactive communication channels, E-banking includes the systems that enable financial institution customers, individuals of businesses, to access accounts, transact business, or obtain information on financial products and services through a public or private network, including the Internet. Customers access e-banking services using an intelligent electronic device, such as a personal computer, personal digital assistant, automated teller machine, Touch tone telephone. While the risks and controls are similar for the various e-banking access channels, this booklet focuses specifically on Internet-based services.


1.3 Salient Features of Internet Banking


The salient features of Internet Banking in India enlisted below


  Easily adoptable by customers.

  Easy to deploy and maintains.

  Cost effective solution.

  Enables the bank to reach its customers on the net.

  Reduce rush at the counters of the bank.

  Enables the customers of the bank to access information from anywhere and at any time.

  Balance and transaction history search.

  Transaction history export.

  Order new statements.

  Mobile banking.


  Pay bills with BPAY

  Receive bills online with BPAY view

  Pay anyone payments.

  Multi payments

  SMS banking services


1.4 Objectives of Study


The overall objective of the present study is to analysis the role of reach of Internet banking in India. The specific objectives of the study are enunciated below.


  To examine the reach of internet banking

  To analyze awareness among customers using internet banking

  To identity the level of security among customers in using these services

  To find out the popularity of the internet banking service in customers as users and non users along with reasons.


1.5 Functions of Internet Banking


The following are the main function of internet banking in India

  Issue Demand Drafts online

  Transfer funds to own and third party accounts

  Credit beneficiary accounts using the VISA Money Transfer, RTGS/NEFT feature

  Generate account statements

  Setup Standing Instructions

  Configure profile settings

  Use e Tax for online tax payment

  Use e Pay for automatic bill payments

  Interface with merchants for railway and airline reservations

  Avail DEMAT and IPO services


1.6 Internet Banking in India


  The Reserve Bank of India constituted a working group on Internet Banking. The group divided the internet banking products in India into 3 types based on the levels.

  Information Only System:  General purpose information like interest rates, branch location, bank products and their features, loan and deposit calculations are provided in the banks website. There exist facilities for downloading various types of application forms. The communication is normally done through e-mail. There is no interaction between the customer and bank's application system. No identification of the customer is done. In this system, there is no possibility of any unauthorized person getting into production systems of the bank through internet.

  Electronic Information Transfer System:   The system provides customer- specific information in the form of account balances, transaction details, and statement of accounts. The information is still largely of the 'read only'  format. Identification and authentication of the customer is through password. The information is fetched from the bank's application system either in batch mode or off-line. The application systems cannot directly access through the internet. 

  Fully Electronic Transactional System:  This system allows bi-directional capabilities. Transactions can be submitted by the customer for online update. This system requires high degree of security and control. In this environment, web server and application systems are linked over secure infrastructure. It comprises technology covering computerization, networking and security, inter-bank payment gateway and legal infrastructure. 


1.7 Highest Internet User Countries in the World


India is the fourth largest internet user countries in the world. The reach of internet banking has also increased in India due to the internet usage increase.

1.8 Use of Internet Banking in India for last few Years












Increase %











The number of internet banking users has increased from 9% in 2003 to 50% in 2010 due to increase in internet services. Multiple services can be offered through online banking such as bill payment services, Fund transfer, railway ticket booking etc.


Internet banking is changing the banking industry and is having the major effects on banking relationships.  The net banking thus, "now is more of a norm rather than an exception in many developed countries" due to the fact that it is the economical way of providing banking services.  Banking is now no longer confined to the traditional brick and mortar branches, where one has to be at the branch in person, to withdraw cash or deposit a cheque or request a statement of accounts.  There is need to scan and analyze the market and respond to the needs of customers and to generate awareness regarding advantages of internet banking. 


1.9 SWOT Analysis of Internet Banking


The following are the strength, Weakness opportunists and threats of Internet Banking in India


1.9.1 Strengths


  Aggression towards development of the existing standards of banks

  Strong regulatory impact by central bank to all the banks

  Presence of intellectual capital to face the change in implementation with good quality

  Fully computerized and techno savvy

  A person can access his account from anywhere he is

  A person can do banking transactions like funds transfer to any account, book ticket, bill pay at any time of the day


1.9.2 Weaknesses


  High bank service charges. All the bank charges highly to the customers for the services provided through internet banking

  Poor technology infrastructure

  Ineffective risk measures

  Easy Access of internet banking account by wrong people through email ids

  When the server is down the whole process is handicapped


1.9.3 Opportunities


  Increasing risk management expertise

  Advancement of technologies, strong asset base would help in bigger growth

  Safety of using internet banking is robust, so more internet banking users in future

  The international scope of internet banking provides new growth perspectives and internet business is a catalyst for new technologies and new business processes


1.9.4 Threats


  Banks provides all services through electronic computerized machines and this creates problems to the less educated people

  Inability to meet the additional capital requirements

  Huge investment in technologies

  Internet banking will be replaced by mobile banking


1.9.5 Inference of SWOT Analysis


With the growth of internet at a rapid pace and the peoples time constraints, internet banking is used widely used for all the banking transaction purpose all over the world. Banking working hours is not limited to internet banking as the banking account can be accessed throughout the day.


1.10 Advantages


The advantages of internet banking are listed below.


  Eliminates the use of paper and replaces it with computer screens.

  No need to stand in line at the bank, because all you have to do is log on to the internet access your account.

  It is safe, hassle free, saves hours of time a month.

  Greater reach to customers.

  Quicker time to market.

  Ability to introduce new products and services quickly and successfully.

  Ability to understand its customer needs.

  Customers are given access to information easily across any location.

  Greater customer loyalty.

  It is convenient.

  There are no geographical barriers.

  Getting quarterly statements from the bank, transferring funds to outstation.

  Services can be offered at a miniscule cost.


1.11 Why Consumers are not Using Internet Banking


These are the following reason why consumers are not using internet banking in India.



  No perceived need

  Lack of knowledge about the service


  Lacking the human touch

  Pricing concerns

  IT fatigue


  Managerial implications



1.12 Difficulties


These are all the following difficulties in Internet Banking in India


  The RBI does not still allow inter-bank funds transfer through the net since the Cyber laws are still not in place. Once allowed, this could pave the way for smooth cash management.

  Security also continues to remain a major issues especially in the case of corporate, as bulk transactions are done in a day.

  Bankers are aware of the fact reliable transaction technology as well as management of the security perceptions of customers are the keys to success.

  The infrastructural costs of providing such services are quite high.

  Limited criteria in online trading.

  Delay in fund transfer.

  When server downs the whole process handicapped.

  Technical problems occur sometimes which affect customers badly.

  Late processing also sometimes in some services create a hurdle causing delay.

  Late security level in the service to cope with hacking problem.


1.13 Findings


The main findings of the study are presented herewith.


  In the users ratio of internet banking 65% of customers are using this service.

  More banks are connecting to the any software company to running the E-banking service. In these services the SBI banks is top in service of E-banking.

  The services that are mostly used by maximum customers are transactions, online trading, bill payment, shopping etc.

  The mode of the cash deposit in bank is for use to online transaction cash, cheque & e-banking.

  Different banks different charge on online service.

  Although there is some feeling of insecurity also but still due to the multi-features service and business class prefer it.


1.14 Suggestions


The following are the suggestions for the further improvement of Internet Banking in India


  To prevent online banking from remaining customers to prompt this service through advertising company.

  After repairing this basic deficiency, banks must ensure that their service is competitive.

  Bank should provide the services in different languages.

  All the complaints felt by the customers should be considered with seriousness and solution based approach to keep them satisfied in long run,

  The bank should extend their tie-up contracts with other various institutions whether financial or non-financial for convenience of its customers.

  Bank should extend the technology which is used in internet banking in order to remove the difficulties.


1.15 Conclusion


Internet banking has become a necessary survival weapon and is fundamentally changing the banking industry worldwide. Today, the click of the mouse offers customers banking services at a much lower cost and also empowers them with unprecedented freedom in choosing vendors for their financial service needs. The rise of Internet banking is redefining business relationship with the customers. The International scope of Internet banking provides new growth perspectives and Internet business is a catalyst for new technologies and new business processes. The reach of Internet banking has rapidly increased due to the Telecommunication Infrastructure development in India.


References and Notes


1. Data Protection in Consumer E-banking Journal of Internet Banking and Commerce, April 2006, vol.11,no.1 (http://www.arraydev.com/commerce/jibc/)

2. Adoption of Internet Banking: An Empirical Investigation of Indian Banking Sector by Balwinder Singh, Reader, Department of Commerce and Business Management, Guru Nanak Dev University, Amritsar, India.

3. A Study of Net Banking provided by HDFC Bank, www.scribd.com/.../a-study-of-


4. ICICI Bank Consumer Banking in India, www.icicibank.com

5. Project on SWOT analysis of ICICI Bank, www.scribd.com/doc/13163460/Swot-of- ICICI-Bank

6. Services provided by the bank through E-Banking in India by Abhinav Tawani,


7. Internet Banking Comptrollers Handbook October 1999

8. Internet Banking in India part I by Dr. A.K. Mishra, www.banknetindia.com

9. Why consumers are not using Internet Banking : a qualitative study by Philip Gerrard Nanyang Business School Singapore, www.emeraldinsight.com/0887-6045.htm

10.Towards online banking by Soutiman Das Gupta, Soutimand@networkmagazineindia.com

11.Internet users Top 20 countries internet usage, www.internetworldstats.com/top20 htm

12. The Indian internet banking journey, www.icmrindia.org